Paul Collier and his Plundering Planet: When Both Economists and Environmentalists Don’t Get it Right
Do you remember The Bottom Billion, Paul Collier’s 2007 book which became a classic? If you do, you will certainly like his latest work, The Plundered Planet. He came to launch his new book to the Bank this week, and I found it both fascinating and provocative. Let me give some examples of why.
Professor Collier, now the Director of the Centre for the Study of African Economies at Oxford University, declares a two-front war on economists and environmentalists at the same time. He is against what he calls “utilitarian economists,” because if left on their own, they would end up plundering the planet. But Collier also takes on “romantic environmentalists,” who would be unable to eradicate hunger in case they’re given the chance to rule the world. So as you can see, the book’s premises don’t really fit into the script of the blockbuster, Oscar-winning movie Avatar.
For Collier, who also worked as the Bank’s Research Director some years ago, Nature is the lifeline for the countries of the bottom billion – and thus cannot remain untouched. With a strong faith in the power of well-informed ordinary citizens, Collier proposes a series of international standards that would help poor countries rich in natural assets better manage those resources. Technology, which enlarges the capacity of ordinary citizens, is also necessary to turn Nature into assets. But of course, in order to be effective and benefit the bottom billion instead of just the few at the top, regulation, which requires governance, is another seminal element of the equation to create prosperity. If you leave regulation out of the equation, as some Libertarians do, the result is nature plundered. But if you end up with too much regulation – curbing the use of Nature – and thus preventing technology, then the result is hunger. And I’m certainly not one of those radical, romantic environmentalists who can imagine a bottom billion who is hungry but happy.
China and India are both racing ahead economically. But the manner in which they are growing is dramatically different. Whereas China is a formidable exporter of manufactured goods, India has acquired a global reputation for exporting modern services. Indeed, India has leapfrogged over the manufacturing sector, going straight from agriculture into services.
Keynes is best known for suggesting fiscal stimulus policies and programs to increase aggregate demand to get out of a deep recession. Since the marginal propensity to consume is positive and less than one; the bigger it is, the larger the fiscal multipliers will be and the faster we will get out of a recession.
The global financial and economic crisis of 2008 has brought an urgency to focus on shorter-term policy issues related to managing bubbles, analyzing current development paradigms, and drawing out policy lessons for future action, particularly lessons learned during the past two years. At the same, longer-term development challenges also must be addressed to avoid the mistakes of 1970s and 1980s when managing stabilization issues dominated economic policy making and development economics was pushed aside for a while. For example, with the exception of East Asian countries and more recently India, why are African, Eastern European and Central Asian, and other South Asian countries unable to sustain high growth rates for more than five to seven years? What are the policy implications of demographic changes and climate change? There is a need for policy discussion on frontier topics such as rethinking globalization in trade, finance, and labor; new economic geography; green growth; and inclusive, balanced, and sustainable growth.
Why save the banks, and not their clients?
Institutions matter was the oft chanted mantra for the past fifteen years. We were told that in the presence of social conflict between various groups, between haves and have-nots, political power precedes political institutions, economic institutions and economic policies. But, political power could be de jure (due to constitution, fair elections and smooth transition to political power) or de facto such as dictatorships and authoritarian leaders usurping power by coups and violence. Sixteenth century colonialism established ‘settler’ and ‘exploitative’ institutions depending on the then existing ‘climate’ in the colonized countries. For example, if the climate was unbearable and malaria-stricken, the colonial masters established an exploitative relationship of shipping out natural resources. If the climate was hospitable, they settled in with family in these countries and started administration and other institutions.